Can Incentives Drive OP Prices Higher?

Optimism (OP) has been on the forefront of the blockchain trade with its incentive program, which lately led to the protocol’s cumulative buying and selling quantity exceeding a formidable $3.8 billion.

Analyst Ryan Holloway has shed mild on the outstanding affect of Optimism’s incentive program. The supply of OP buying and selling rewards and incentives on varied platforms, together with Polynomial, performed a pivotal position on this surge in utilization metrics.

The incentivization technique employed by Optimism has confirmed wildly profitable, leading to an astounding 23-fold improve in buying and selling quantity for the protocol. This achievement, nevertheless, comes with a caveat, because it raises questions concerning the composition of this newfound buying and selling exercise.

Simply dropped an evaluation with @t__norm on the affect of @PolynomialFi‘s OP incentive program that finally led to the protocol’s cumulative buying and selling quantity surpassing $3.8B

🧵 👇 pic.twitter.com/UahucTcVJ0

— Ryan Holloway (@raholloway) September 9, 2023

Rise In Buying and selling Quantity Masks Optimism’s Progress In Each day Merchants

Whereas the surge in buying and selling quantity is undoubtedly spectacular, a deep evaluation reveals a extra nuanced image. The expansion in each day merchants has been comparatively modest, suggesting the potential for a big rise in energy customers or, in a much less favorable situation, potential wash buying and selling actions.

However what precisely is wash buying and selling? Wash buying and selling includes artificially inflating buying and selling volumes by executing simultaneous purchase and promote orders for a similar asset, giving the phantasm of elevated demand and exercise. This follow is against the law in conventional monetary markets and is considered negatively within the cryptocurrency area as a result of its potential to mislead buyers.

Optimism market cap presently at $1 billion. Chart: TradingView.com

Optimism Faces DeFi Sector Headwinds

Optimism has confronted its fair proportion of challenges in gaining a foothold within the aggressive DeFi sector. Latest reviews point out a notable lower in complete worth locked and decentralized trade volumes on the community in latest weeks. This decline in exercise is mirrored within the community’s financials, with income plummeting by 37.5% within the final month, accompanied by an general exercise lower of 19.7% over the identical interval.

Regardless of these setbacks, Optimism’s native token, OP, presently holds a value of $1.26 in accordance with CoinGecko, with a 0.9% achieve within the final 24 hours. Nevertheless, it has seen a 6.2% decline over the previous week.

The sustainability of Polynomial’s retention charges after the conclusion of the inducement program might be a vital think about figuring out its long-term affect on Optimism. Because the community navigates the challenges posed by wash buying and selling issues and its struggles to ascertain a agency presence in DeFi, the cryptocurrency group might be intently waiting for indicators of resilience and adaptableness.

Whereas Optimism’s incentive program has undeniably pushed an astonishing surge in buying and selling quantity, the sustainability of this progress and the decision of its challenges will decide the protocol’s long-term success within the extremely aggressive world of cryptocurrency.

(This website’s content material shouldn’t be construed as funding recommendation. Investing includes danger. While you make investments, your capital is topic to danger).

Featured picture from Insperity